SBC Seeks Inquiry Into Time Warner DSL Tactic

Regional phone operator SBC Communications on Wednesday asked for federal and state investigations of Time Warner, accusing the company of anti-competitive tactics in the battle for Internet access in Houston.

Time Warner’s cable business offered its employees in Houston free Internet service or a chance at winning cash if they ordered, and then canceled, a digital subscriber line from SBC subsidiary Southwestern Bell.

Technical factors limit the areas in which DSL service can be offered, and knowing that information could have helped Time Warner market its own cable-TV based Internet service, Road Runner.

San Antonio-based SBC asked the Texas Public Utility Commission to investigate the actions. It also filed a complaint with the Federal Communications Commission, asking Chairman William Kennard to scrutinize Time Warner’s pending merger with America Online, citing anti-competitive measures by Time Warner.

An FCC spokesman said the commission was reviewing the complaint.

Time Warner employees received fliers in their May 12 paychecks, asking them to cancel shortly after subscribing to Southwestern Bell’s DSL service, SBC spokesman Selim Bingol said.

For their efforts, workers were offered free cable Internet service from Time Warner’s Road Runner division or a chance at a $100 cash drawing.

The flier told Time Warner employees that the company wanted to “locate areas in Houston that Southwestern Bell (our competitor) can and cannot service with their high speed online service, DSL.”

Time Warner’s 1,200 area workers were given a Southwestern Bell number to call to subscribe to the service, were told to keep a confirmation letter for their order and give it to staff, then cancel.

“This tied us up with serving bogus orders, can cost us hundreds of dollars per order, and most importantly, detracts from our ability to serve legitimate customers,” said SBC spokesman Selim Bingol.

SBC, the parent company of Pacific Bell, wrote a letter of complaint May 17 to Time Warner’s corporate headquarters in New York and Road Runner’s Herndon, Va., headquarters calling the program “unethical and unlawful.”

The flier never was approved by Time Warner’s local division president, and the incentive program was stopped less than a week after senior management found out about it.

Time Warner executives in New York said about 20 employees ordered the SBC service before the program was canceled.

“We have looked into the situation and found out it was a local decision by a mid-level manager,” Time Warner said in a statement. “As soon as management in Houston found out about it, they stopped it. It was a mistake and won’t happen again.”

Time Warner has been sensitive to accusations of anti-competitive behavior since it announced a blockbuster merger in January with America Online.

Earlier this month, Time Warner briefly took ABC affiliates off the air as part of a dispute with the television network and its parent, Walt Disney Co. The FCC ruled that Time Warner violated federal rules by pulling ABC during the sweeps ratings period.